Reply to: DOOMED - More house price falls 'likely'

[expat]

You would have had to borrow £220K, as you paid off £20k of the mortgage. However, despite the larger debt, you would have had >20% deposit for the new house, whereas now you'd have <5%.

Thanks mate. That was my point.

In fact, far from trading up being made easy, you can't even trade level: your former £200k house is now worth £150k, but if you sell for £150k and pay off the mortgage, you now only have £10k deposit to buy a £150k house. You won't get a mortgage on that.

[PM-Junkie]

Government policy will always tend towards stimulating a growth in house prices. The reason for that is that such growth prompts people to go out an borrow money against that growth and spend it on goods and services. Our economic and financial system has "evolved" such that it is totally reliant on the expansion of credit.

That system hasn't been fixed. If you look at the measures adopted by governments and central banks across the world, all they are doing is papering over the cracks (example - look at the resistance and foot dragging to the separation of traditional high street banks from their more risky counterparts like investment banks...that should be an absolute no brainer).

So whilst, IMHO, I think this recession will end sooner than some people think, the growth over the next cycle will be lower than a lot of people expect because of the problems inherent in the system itself (and the debt!!). So in 8-10 years' time this will happen again....and the next one will make this recession look like a garden party because we will still be paying for this one.

[AtW]

Are you suggesting that taking out a mortgage is wrong?

Depends on how much you borrow and whether you are "borrowing up" as DimShrimp so eloquantly put.

[BrilloPad]

"Borrow" your way up, eh?

Are you suggesting that taking out a mortgage is wrong?

[Pinto]

So now you have to borrow £200K to move up. Before you would have had to borrow £240K, so now £40K less in debt.

You would have had to borrow £220K, as you paid off £20k of the mortgage. However, despite the larger debt, you would have had >20% deposit for the new house, whereas now you'd have <5%.

[AtW]

So now you have to borrow £200K to move up. Before you would have had to borrow £240K, so now £40K less in debt.

"Borrow" your way up, eh?

[DimPrawn]

I waited before starting this thread as I expected you to start it. You are slacking...............

Too busy making money to waste time on CUK.

Ciao.

[BrilloPad]

So now you have to borrow £200K to move up. Before you would have had to borrow £240K, so now £40K less in debt.

I waited before starting this thread as I expected you to start it. You are slacking...............

[DimPrawn]

Not if they still have a mortgage.

Ex: Bought your house just a few years ago for £200k, now want to sell up and buy a bigger house, let's say one that was £280k at that time.

Suppose you had paid £40k deposit, and got £160k loan; and have by now paid off £20k.

Loan now £140k outstanding; house prices down 25% so yours worth £150k; new house worth £210k

Sell for 150k. Pay off loan, have £10k left for deposit on new house, which costs £210k.

Doesn't look to me like it has become easier to buy.

So now you have to borrow £200K to move up. Before you would have had to borrow £240K, so now £40K less in debt.

[expat]

And people wanting to buy a bigger house or a house in a better area.

Not if they still have a mortgage.

Ex: Bought your house just a few years ago for £200k, now want to sell up and buy a bigger house, let's say one that was £280k at that time.

Suppose you had paid £40k deposit, and got £160k loan; and have by now paid off £20k.

Loan now £140k outstanding; house prices down 25% so yours worth £150k; new house worth £210k

Sell for 150k. Pay off loan, have £10k left for deposit on new house, which costs £210k.

Doesn't look to me like it has become easier to buy.

[AtW]

I think rampant inflation is better.

When inflation is out of control it is very difficult to get it back to low levels: high inflation kills investment into companies and create jobs.

[TimberWolf]

Well, there needs to be a correction in the housing market, otherwise your average first time buyer will be a 46 year old divorcee with 3 grown up children.

Either it can happen through prices falling or rampant inflation - I know which I prefer.

Yes, but there are other things wrong with the economy that need correction, e.g. GPs on £billions of pounds a year which won't be cured by falling house prices. I think rampant inflation is better.

[BrilloPad]

Well, there needs to be a correction in the housing market, otherwise your average first time buyer will be a 46 year old divorcee with 3 grown up children.

Either it can happen through prices falling or rampant inflation - I know which I prefer.

Maybe all houses will be owned by a single person and the rest of us will rent...........

[BrilloPad]

And people wanting to buy a bigger house or a house in a better area.

Nothing wrong with a bigger houseif you need the room (though you might consider building an extension).

"Better" areas are over-rated. The neighbours can be unfriendly/miserable......

okay : I take your point : you win!

[Moscow Mule]

Are falling and low house prices a good thing for the majority?

Well, there needs to be a correction in the housing market, otherwise your average first time buyer will be a 46 year old divorcee with 3 grown up children.

Either it can happen through prices falling or rampant inflation - I know which I prefer.